As announced today by the Brazilian National Statistics Office, real GDP expanded by a seasonally-adjusted 1.9% in the second quarter 2009 compared to the previous quarter, having plummeted by 4.3% overall in the two preceding quarters. A key boost came from private consumption which notched up the strongest gain (2.1%) since the fourth quarter 2007. A further growth propellant was foreign trade, while the slide in investment was at least halted. For the moment, Brazil is the last in a whole chain of emerging markets to have reported very positive second quarter GDP data in recent weeks. Only yesterday the Turkish economy surprised with a strong rebound from the slump in the first quarter of the year.
Brazil: Recession is over in the land of the Sugar Loaf mountain
Brazil is performing far better in the current crisis than it has done in previous crises. This is largely due to the marked improvement in the macroeconomic framework which has rendered the country far less susceptible to external shocks than used to be the case. Brazil has made major progress in recent years particularly with regard to the state of public finances and the foreign currency liquidity situation (catchwords: current account balance and currency reserves). The attendant economic stabilization gave the country the leeway to apply rigorous economic countermeasures in the current crisis. For instance, the Brazilian central bank has chopped 500 basis points off key interest rates since the beginning of the year, bringing them down to a historic low at currently 8.75%. The government has also responded decisively by applying fiscal measures aimed particularly at boosting domestic demand. For example, production taxes on a string of industrial goods were lowered and there were also cuts on the income tax front. In addition, the state banks stepped up their lending in order to offset the rather restrained lending by the private banks.
In the coming quarters, the economic recovery will doubtless struggle to maintain the momentum seen in the second quarter, with the renewed need to consolidate public budgets likely to be a particular drag. With the economic rebound proving stronger and swifter than expected, we now believe that economic output will contract this year by only 0.6% (previously: -1.5%). Next year we expect GDP growth of 2.5%.
Gregor Eder
tel.: 49 / 69 / 2 63 – 5 33 58
e-mail: [email protected]